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Will higher LNG prices abroad mean higher heating costs at home?

Environmental groups pose price question on natural gas exports

The Environmental Law Centre submitted a request Thursday for federal and provincial environment ministers to consider a broad range of environmental and economic impacts, including whether offshore exports of LNG will mean higher domestic prices for natural gas.

Photograph by: Troy Fleece
, Regina Leader-Post

Environmental groups want to know whether exporting large amounts of British Columbia’s natural gas abroad will raise home-heating costs for British Columbians at home before the province races to build multi-billion-dollar gas liquefaction plants to cash in on the resource.

With four major LNG export proposals at some stage of the review process and several more waiting in the wings, the Environmental Law Centre at the University of Victoria, on behalf of the Smithers-based Northwest Institute for Bioregional Research, is petitioning B.C. Environment Minister Mary Polak and her federal counterpart Leona Aglukkaq to conduct a strategic review of the cumulative impacts of all that activity.

“Undue haste is the direct road to error,” said Calvin Sandborn, legal director of the Environmental Law Centre, “and there seems to be undue haste here.”

The groups submitted their request Thursday asking for the ministers to consider a broad range of environmental and economic impacts, including whether offshore exports of LNG will mean higher domestic prices for natural gas.

The request cited media reports and a submission by FortisBC to the National Energy Board related to Shell Canada’s proposal to build a plant at Kitimat in raising the question.

One report noted Australia’s experience, where domestic natural gas prices rose as much as fourfold in some locations as the country’s exports increased.

FortisBC’s concerns related to what might happen to domestic prices if the vast gas supplies developed to support an export industry don’t remain interconnected to the overall North American gas market.

“We don’t have all the answers on this, but this is a question that should be asked,” Sandborn added.

However, B.C.’s biggest gas utility isn’t expecting LNG development to have a big impact on domestic prices, which it expects to remain relatively stable over the next 15 years compared with the wild swings in pricing in the last five years.

“Studies have shown that we may see a small lift in pricing (due to exports), but that would be far outweighed by the economic benefits of being able to develop our natural gas industry,” said Cynthia Des Brisay, FortisBC’s vice-president for supply and development.

That small lift, however, may be in the order of 20 cents per unit of natural gas, when current prices are in the range of $3.50 per unit.

Des Brisay said the forecasts FortisBC uses call for North American natural gas prices in the range of $4 to $6 per unit over the next 10 to 15 years, and the estimates factor in potential for exports.

That range is higher than the $2 per unit gas was fetching late last year when the market was glutted with an oversupply from the rapidly developing shale-gas regions in the U.S. However, it is still lower than the $8-$10 range consumers suffered through in 2008 before the U.S. boom in production.

She added that Australia is not comparable to North America because Australia’s domestic natural gas market is small and relies on exports for its development. By contrast, North America’s domestic market is huge and energy companies are only seeking to export a fraction of its gas supply.

“We have sufficient supply to be able to meet those exports without having an undue impact on natural gas prices,” Des Brisay said.

She added that it is important not to confuse North America’s domestic prices with prices for LNG in the Asia Pacific region, which are sitting in the $16-per-unit range.

That price has to factor in the cost of buying gas at domestic prices, the cost of liquefying it and the costs of transporting it by ship to a market that is priced differently than in North America.

The Environmental Law Centre submitted a request Thursday for federal and provincial environment ministers to consider a broad range of environmental and economic impacts, including whether offshore exports of LNG will mean higher domestic prices for natural gas.

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